CARPE DIEM

Professor Mark J. Perry's Blog for Economics and Finance

Tuesday, August 25, 2009

2009 Math SAT Scores Are In: Gender Gap Persists

SAT test scores for 2009 were released today by the College Board, and the male-female gender gap for the mathematics test increased to 35 points to the highest level since 2004, reversing the narrowing gender gap over the previous 4 years (see bottom chart above). The average male score for the math exam was 534 points compared to the average female score of 499 points (see top chart above). What should also be noted is:

3. Females have higher overall GPAs than males, 3.39 vs. 3.24, and females outnumber males at the highest GPAs: more than 60% of students with GPAs equivalent to A and A+ are female.

4. For mathematics courses only, female and male students both have average GPAs of 3.14.

Bottom Line: Based on both overall GPAs and GPAs for math courses, we would expect female students to perform as well as, or better than, males on the math SAT exam, and yet we find exactly the opposite: a gender gap on the math exam in favor of males that persists over time.

Kauffman Foundation's Economics Blogger Forum

The 20-minute video above (direct link here) features a diverse group of writers whose wide-ranging intellectual and political vantage points were recorded during the first-ever Economics Bloggers Forum hosted early this year by the Kauffman Foundation. "The piece highlights some of America’s top economics bloggers, including professional and academic Ph.D. economists and journalists who have built loyal Web audiences by offering in-depth economic analysis and provocative commentary."

Russia's Magnificent Metro Stations

THE ECONOMIST -- One of the first things you notice when using mass transportation in Moscow or St. Petersburg is the depth and beauty of the two cities' metro systems. Gulliver recently spent some time in both cities' subway systems, but there aren't any photos to show you: it's still illegal to snap pictures in Russian metros (one of the reasons they were built so deep underground was to serve as bomb shelters.)

Despite the restrictions, some fearless Wikipedians and flickr users have taken some beautiful pictures of metro systems all across the former Soviet Union, and Treehugger has put them together into a gorgeous (and informative) slide show (see samples above).

MP: For some stats on the Moscow subway system, see Wikipedia listing here, e.g. daily ridership of 7 million, 177 stations, 12 lines. Especially compared to the U.S., the Russia metro stations are more like museums, basilicas or churches than grimy, subway stations, with marble, chandeliers, columns, and stained glass.

Big Sugar's Sickeningly Sweet Deal

WASHINGTON POST -- Down on the farm, the latest dispute pits America's sugar producers against their biggest customers: food manufacturers that add the sweetener to everything from raisin bran to raspberry yogurt. The food makers are unhappy with a recent tightening of supplies that has pushed the wholesale price of refined sugar to 35 cents per pound (see sugar futures prices above at 28-year highs). Warning of higher grocery prices and lost jobs, the manufacturers want Agriculture Secretary Tom Vilsack to allow more imports. Domestic sugar growers insist that supplies are adequate, thanks in part to imports of Mexican raw sugar to U.S. refineries, which were allowed on a tariff-free basis for the first time last year as part of the North American Free Trade Agreement.Since 1982, domestic sugar producers have lobbied for, and gotten, a government-guaranteed share of the market. Today, their guaranteed share is up to 85%; the rest gets divided up among some 40 countries lucky enough to hold quotas of varying sizes. The advent of free Mexican imports upset this scheme somewhat, which is why the 2008 farm bill promised that the government would offset them by purchasing excess U.S. sugar and shipping it to ethanol factories. In addition, the federal government guarantees minimum prices for both raw cane sugar and refined beet sugar. Pretty sweet.

To be sure, the various sugar programs don't involve the huge direct outlays of taxpayer money that other farm supports do. In a way, though, they're even worse, since the blatant protectionism operates as a non-transparent tax on every product that uses sugar as an input. Free trade in sugar would bring short-term disruptions for domestic refineries and the growers who own them but, ultimately, greater efficiency and fairness for U.S. consumers and our trading partners. Alas, we're probably stuck with the status quo -- and the wasteful inter-industry political battles it engenders -- at least until Congress writes a new farm bill in about four years.MP: Couldn't we apply our current energy policy to sugar, and significantly restrict domestic sugar production and open up our borders to lower-priced world sugar?

Case-Shiller Home Price Index Rises for Second Straight Month, First Time In Almost 3 Years

NEW YORK (Reuters) - Prices of U.S. single-family homes rose for the second consecutive month in June, exceeding expectations and adding to evidence that the three-year housing slump is easing, Standard & Poor's reported on Tuesday.

The S&P/Case-Shiller composite indexes of 10 and 20 metropolitan areas both rose 1.4 percent in June from May, almost three times the 0.5 percent increases of the month before. May's increases were the first in nearly three years (see chart above, data here).

Optimism over a housing recovery blossomed last week after reports showed rising confidence among homebuilder and sales of existing homes rose in July for the fourth consecutive month. Economists expect the sector's recovery could help the nation emerge from recession and further stabilize financial markets that have suffered their worst crisis since the 1930s.

MP: The increases in May and June for the Composite-20 Index marks the first time in almost three years of back-to-back monthly increases, and the June increase was the largest monthly increase since October 2005 (see chart above, data here).

Watch Perfectly Good Assets Being Destroyed

Thanks to the glories of YouTube, we can watch as the government mandates the destruction of perfectly good automobiles to "help the economy." Here is a very nice 1990s Dodge Dakota 4X4 being destroyed. It is a much better vehicle than my pick up truck.

This is a Corvette that looks to be in pretty good condition. Black, pretty sharp car. I'm sure there are a lot of young men crammed into 2001 Malibus who would have liked this car.

A nice looking 2001 Mazda light truck with 75,000 miles bites the dust here. Here's a good looking Volvoprematurely destroyed. This SUV would look at home in any tony U.S. suburb.

Really, you ought to look at at least a couple of these videos, and the hundreds more like them on YouTube. Are these "clunkers?" Can it really help the economy to destroy perfectly good assets? Are the people running the government the most economically illiterate bunch since FDR ruled the roost? Or are they dumber?

Facts About Infant Mortality

Steve Chapman -- African-American babies are far more likely to die than white ones, which is often taken as evidence that poverty and lack of health insurance are to blame. That's entirely plausible until you notice another racial/ethnic gap: Hispanics of Mexican or Central or South American ancestry not only do consistently better than blacks on infant mortality, they do better than whites. Social disadvantage doesn't explain very much.Thomas Sowell -- While it is true that black mothers get less prenatal care than white mothers and have higher infant mortality rates, it is also true that women of Mexican ancestry also get less prenatal care than white women and yet have lower infant mortality rates than white women. But, once people with the prevailing social vision see the first set of facts, they seldom look for any other facts that might go against the explanation that fits their vision of the world.

Signers of "Tax-Me" Petition Can Pay Right Now

Christian Science Monitor -- Raise my taxes, says millionaire Chuck Collins. The scion of the Oscar Mayer family supports a House panel’s healthcare plan that would boost taxes for families earning more than $350,000 a year. He also advocates ending the Bush tax cuts for the rich right away, rather than when they expire at the start of 2011, and closing foreign tax havens to Americans.

Although the financial burden would be sizable, Mr. Collins is busy urging other wealthy Americans to sign a tax-me petition. “The good news is there are still people out there willing to pay for the common good,” says Collins, whose nonprofit Wealth for the Common Good is collecting the names. As of July 21, some 210 wealthy people had signed. Collins hopes to get more than 1,000 signatures before delivering it to President Obama and House leaders.

MP: They now have more than 1,000 names on the "Tax-Me" petition to reverse the Bush-era tax cuts on wealthy households and "almost 200 of these signers have household incomes over $235,000 and would pay the tax" (full list here). I guess that means the other 800 signers either don't make more than $235,000 or just aren't willing to pay the higher taxes themselves? But if these individuals are willing to pay higher taxes in the future once the Bush tax cuts expire in 2011, they should be willing to pay those higher taxes right now if they are so "willing to pay for the common good." So why wait? Here are the instructions from the Treasury Department's website for making a gift to the United States government today:Citizens who wish to make a general donation to the U.S. government may send contributions to a specific account called "Gifts to the United States." This account was established in 1843 to accept gifts, such as bequests, from individuals wishing to express their patriotism to the United States. Money deposited into this account is for general use by the federal government and can be available for budget needs. These contributions are considered an unconditional gift to the government. Financial gifts can be made by check or money order payable to the United States Treasury and mailed to the address below.Gifts to the United StatesU.S. Department of the TreasuryCredit Accounting Branch3700 East-West Highway, Room 622DHyattsville, MD 20782 Why doesn't the Wealth for the Common Good publish this information on its website for those signers of the petition who are willing to declare "I Will Pay Higher Taxes to Invest in My Country and I Am Willing to Pay Right NOW." Chuck Collins could be an example and inspiration to his signers by being the first to make such a gift.

Monday, August 24, 2009

July California Home Sales Highest Since August 2006; 13 Consecutive Monthly Sales Increases

DQNews -- An estimated 45,079 new and resale houses and condos were sold statewide last month. That was up 2.1% from 44,167 in June, and up 14.1% from 39,507 for July 2008. Sales have increased on a year-over-year basis the last thirteen months. Last month's sales were the highest for any month since 51,054 homes were sold in August 2006. The median price paid for a home last month was $250,000, up 1.6% from $246,000 in June, and down 21.4% from $318,000 for July a year ago. The upturn in median the last three months is the result of a relative increase in sales of more expensive homes.

New Big Mac Index: Working Time To Buy Big Mac

THE ECONOMIST -- The size of your pay packet may be important, but so is its purchasing power. Helpfully, a UBS report published this week offers a handy guide to how long it takes a worker on the average net wage to earn the price of a Big Mac in 73 cities. Fast-food junkies are best off in Chicago, Toronto and Tokyo, where it takes a mere 12 minutes at work to afford a Big Mac. By contrast, employees must toil for over two hours to earn enough for a burger fix in Mexico City, Jakarta and Nairobi.

Cash for Clunkers, Bad News for Repair Shops: "The Gov.t Is Using My Own Money to Hurt My Business"

Fairfax Times -- "Cash for Clunkers" is bad news for Bill Wiygul, whose family owns several automotive repair shops in northern Virginia. Starting with one repair shop in Alexandria in 1976, the family now runs four automotive centers, two in Alexandria and one each in Reston and Herndon.

Shortly before the CARS program was initiated, Wiygul’s family purchased some property next to its Herndon location and planned to expand that location. Business was booming, in part because of an economy that forced many consumers to hold on to their older vehicles and keep them up in lieu of spending much-needed money on newer models.

“We put $1 million into that location,” Wiygul said of his Herndon site. “And now the federal government is subsidizing my competition. It is the most infuriating thing I have seen in 30 years of business.”

Wiygul said that among his four locations, he has lost at least 20 customers, including eight in Reston. “They are telling me they are going with the federal program,” he said of his disappearing clientele.

Wiygul said he does not blame consumers for joining the federal gravy train, he just wishes his tax dollars were not being used to help them do it. “,” he said. “And the thing that really gets me is that they are clearly favoring one segment of the auto industry over another. And of course it is the segment that they have a vested financial interest in.”

As part of the federal bailout plan, the U.S. government has invested about $65 billion and currently owns approximately 61% of General Motors and about 10% of Chrysler. “It is a very slippery slope,” Wiygul said.

Others in the auto repair business are also feeling the pain. Roy Page, who owns Advanced Auto Tech in Newington, said his business has dropped off 25% since the inception of the “cash for clunkers” program. “The older cars that we used to see are just no longer there,” he said. “Customers are telling us they are going with the program.”

Wiygul says that because of the program, potentially viable cars are also being taken off the market, limiting the affordable options that those in the market for a used vehicle can choose from. “This thing will have consequences that no one has thought of yet,” he said.

“For example, newer cars have hidden costs to consider, such as higher insurance, more expensive tires, and car payments that will still need to be paid long after the program is a memory.”

Rx: The Interstate Insurance Competition Cure

Click to enlarge.

Wall Street Journal -- Allow us to suggest a path to competition that will be a lot easier than erecting the impossible dream of a public option: Let insurance companies sell health-care policies across state lines. Interstate competition made the U.S. one of the world's most efficient, consumer driven markets. But health insurance is a glaring exception.Affordability would improve if consumers could escape states where each policy is loaded with mandates. "If consumers do not want expensive 'Cadillac' health plans that pay for acupuncture, fertility treatments or hairpieces, they could buy from insurers in a state that does not mandate such benefits," Devon Herrick (senior fellow with the National Center for Policy Analysis) has written. MP: The chart above (click to enlarge) is based on this study from the America’s Health Insurance Plans (Table 3), and shows the huge variation in the average annual premium for single health insurance coverage by state (2006-2007). The average health insurance ranges from a low of $1,254 in Wisconsin to a high of $8,537 in Massachusetts, and the national average is $2,613. That kind of variation couldn't exist in a competitive market for health insurance. Interstate competition for health insurance would go a long way towards bringing health insurance costs down.

UK Stock Market At Highest Level Since Early Oct.

There's still a few hours of trading left, but UK's benchmark stock market index, the FTSE 100 Index, is at a fresh 10-month high today of about 4875, the highest level since early October 2008 (see chart above).

Debt Pollution

In the language of economics, "debt pollution" causes the same kind of negative consequences for our children and grandchildren that air or water pollution causes.

As an economist, it is striking to me that there is little or no apparent interest on the part of the legions of young people captured by the rhetoric of environmentalism in the very same forces at work with respect to the national debt. If we have moral obligations to future generations to use our resources in ways that incorporate our children and grandchildren in our calculations, then we have such obligations with respect to both natural and financial resources.

Debt-financed green expenditures rob one set of resources from future generations in the name of trying to conserve other resources for them. Yet few environmentalists seem to see that contradiction and raise concerns about the debt.

If the environmental movement is really about improving the lives of generations to come and not just valuing nature more than humans, it should be just as vocal about the growth in the national debt and aware of its own contributing role to that growth as it is about the overuse of natural resources in the present day.~Steve Horwitz in the Tampa Tribune

Chicago Fed Index Increases for 6th Straight Month

The Chicago Fed National Activity Index was –0.74 in July, up from –1.82 in June. All four broad categories of indicators improved in July, while three of the four continued to make negative contributions to the index. Production-related indicators made a positive contribution to the index for the first time since October 2008 and for only the second time since December 2007.

The three-month moving average, CFNAI-MA3, was –1.69 in July, up from –2.18 in the previous month. July’s CFNAI-MA3 suggests that growth in national economic activity was below its historical trend. With regard to inflation, the amount of economic slack reflected in the CFNAI-MA3 indicates low inflationary pressure from economic activity over the coming year.

The improvement in the index in July was due in large part to the production and income category of indicators. This category made a contribution of +0.26 to the index in July compared with –0.38 in June. Manufacturing production increased 1.0 percent in July, its biggest increase since December 2006, following a decline of 0.5% in the previous month. In addition, manufacturing capacity utilization increased to 65.4 in July from 64.7 in June.

MP: The Chicago Fed National Activity Index (CFNAI-MA3) has increased in each of the last six months, the first six consecutive monthly increase since the end of the 2001 recession, see bottom chart above.

Markets In Everything: Put-Pocketing in London

LONDON (Reuters) – Visitors to London always have to be on the look out for pickpockets, but now there's another, more positive phenomenon on the loose -- putpockets. Aware that people are suffering in the economic crisis, 20 former pickpockets have turned over a new leaf and are now trawling London's tourist sites slipping money back into unsuspecting pockets.

Anything from 5 pounds ($8) to 20 pound notes is being surreptitiously deposited in unguarded pockets or open handbags in Trafalgar Square, Covent Garden and other busy spots. The initiative, which runs until the end of August in London before being rolled out countrywide, is being funded by a broadbrand provider (TalkTalk), which says it wants to brighten up people's lives in unusual ways.

Charts of the Day

Sunday, August 23, 2009

U.S. Travel to Canada Declines By 76% Since 2001

According to data from Statistics Canada, the number of U.S. vehicles entering Canada for one-day travel fell in June to the lowest level since 1972, when Canada started recording monthly vehicle travel from the U.S. Only 367,452 automobiles from the U.S. entered Canada in June, down by 76% from the recent peak of 1,536,800 cars during the summer before the 9/11 terrorist attacks in 2001.

New passport rules are keeping Americans at home, with June numbers showing that travel to Canada from the United States fell to its lowest level since Statistics Canada started tracking cross-border trips in 1972.

The number of same-day car trips from the United States was down 26% in June from May, while the overall number of U.S. tourists plummeted to about half of what it was five years ago.

The dramatic drop in travel across the Canada-U.S. border shows that the fears of many in the tourism industry in both countries are coming to pass. After the tougher passport rules were announced in 2005 as part of the Western Hemisphere Travel Initiative, many industry groups warned that the regulations would further discourage Americans already reluctant to travel due to the high dollar and gas prices.

MP: Notice in the chart below that the 40% decline of the U.S. dollar relative to the Canadian dollar between 2002-2007 helps explain the decline in travel to Canada between 2002-2007.

Best Visual Illusions

2007 Best Visual Illusion of the Year -- Here is a novel illusion that is as striking as it is simple. The two images of the Leaning Tower of Pisa are identical, yet one has the impression that the tower on the right leans more, as if photographed from a different angle. The reason for this is because the visual system treats the two images as if part of a single scene. Normally, if two adjacent towers rise at the same angle, their image outlines converge as they recede from view due to perspective, and this is taken into account by the visual system. So when confronted with two towers whose corresponding outlines are parallel, the visual system assumes they must be diverging as they rise from view, and this is what we see. What this illusion reveals is less to do with perspective, but how the visual system tends to treat two side-by-side images as if part of the same scene. However hard we try to think of the two photographs of the Leaning Tower as separate, albeit identical images of the same object, our visual system regards them as the ‘Twin Towers of Pisa’, whose perspective can only be interpreted in terms of one tower leaning more than the other.

The Leaning Tower Illusion also works with paired images of train tracks (pictured below), violating the rules of perspective. It's hard to believe, but these are actually identical images of parallel train tracks. Although the angles are the same in both images, the brain perceives them as being quite different.

2006 Finalist -- First time viewers of this display invariably do not see the 16 circles segmented from the background. Rather, they see a series of rectangles that they frequently describe as “door panels”. The illusion pits segmentation cues against what appears to be a very strong prior to interpret the image as a series of 3-D structures “coffers” with closed boundaries. (A coffer is a decorative sunken panel.) It appears that the prior involves both closure and shape-from shading assumptions. The Coffer Illusion is a variation on Gianni Sarcone’s “Op Art illusion."

Florida Home Sales Increase in July for 11th Straight Month; Condo Sales Increase By 48%

Florida’s existing home sales rose in July – the 11th month in a row that sales activity increased in the year-to-year comparison, according to the latest housing data released by the Florida Association of Realtors (FAR). Statewide existing home sales in July also rose over the previous month’s sales level (MP: The sixth straight month-t0-month increase).Existing home sales rose 37% last month with a total of 15,882 homes sold statewide compared to 11,595 homes sold in July 2008, according to FAR (see chart above). Statewide existing home sales in July increased 0.2% over June’s statewide activity. Florida Realtors also reported a 48% rise in statewide sales of existing condos in July.Florida’s median sales price for existing homes last month was $147,600; a year ago, it was $193,800 for a 24 percent decrease (see chart above). In Florida’s year-to-year comparison for condos, 5,035 units sold statewide compared to 3,396 units in July 2008 for a 48% increase. The statewide existing condo median sales price last month was $108,300; in July 2008 it was $168,700 for a 36% decrease.

MP: Six consecutive month-to-month increases in Florida home sales, 11 straight months of year-t0-year sales increases, and a 48% increase in condo sales. If this isn't a true, solid recovery in the Florida real estate market, how would a real recovery be different?

Steve Horwitz at the Austrian Economists blog uses these Census Bureau Data and concludes that:More than 30% of U.S. households in 2006 earned above $75K compared to under 20% in 1980. Over the same period, the percentage of U.S. households earning under $35K fell from 42.8% to 36.7%. Fewer households are poor, fewer are middle class, and a hunk more are above $75K (see chart above).

The middle classes fell too. The sum total across the $35K to $75K categories fell by 5.4 percentage points (from 38.2% in 2000 to 32.8% in 2006). In other words: the net movement of households was an 11.5 percentage point gain in households above $75K and a net reduction of 11.5 percentage points in houses below $75K. So the percentage above $75K rose from 18.9% to 30.4%. That is, it increased by more than 50% (see chart above).

Throw on top of this the fact that most everything people buy costs less in real terms and you have a recipe for increasing wealth across the board. Not bad for what so many people claim is 30 years of stagnation.

See CD posts here and here about the significant decrease in costs for typical consumer items since the early 1980s.

More on the Gender Gap for NAEP Test Scores

The chart above is based on NAEP test scores (data here) for U.S. 12th grade high school students in economics, mathematics, science, reading and writing. The data show that:

1. Male high school students scored higher than female students on the economics, mathematics and science exams, and those differences in test scores were all statistically significant (1% level or higher).

2. Female students scored higher than male students on the reading and writing exams, and those differences were statistically significant (1% level or higher).

3. For all five exams, the standard deviation for male test scores was higher than the standard deviation for female students, confirming previous studies that have found that regardless of the differences in mean intelligence or test scores between males and females, the variability of male intelligence (and/or test scores) is usually greater than the variability of female intelligence (or test scores).

4. At the 90th percentile of performance, the gap between male and female test scores increases for the economics, mathematics and sciences exams, compared to the gap for all students on those exams. As Dr. T says in a comment on this CD post, "exceptional boys do much better than exceptional girls," and this is a direct consequence of the fact that male test scores have a higher variance (and standard deviation) than female test scores. In other words, even if the mean scores were the same for males and females on these exams, the top 10% of male students would have higher test scores on average than the top 10% of female students.

5. Female students scored 13 points on average higher than males for the reading exam, and 18 points higher for the writing exam, and both differences were statistically significant (1% level or higher).

6. At the 90th percentile, the female-male gap narrows by 2 points for the reading exam (from 13 to 11 points) and by 3 points for the writing exam (from 18 points to 15 points). This could be explained by the greater male variance in test scores for the reading exam (standard deviation of 39 for males vs. 37 for females) and for the writing exam (standard deviation of 35 for males versus 33 for females). Male students are worse on average than females for the reading and writing, but are overrepresented in the upper tails of the distribution (3-4 standard deviations above the mean) compared to females, and this allows males at the 90th percentile to come closer to matching female test scores compared to males at the mean.

Bottom Line: Male high school students outperform female high school students for economics, math and science; and female high school students outperform males students in reading and writing. Additionally, the variability of male test performance (and probably intelligence) is greater than the variability of female test performance, and this applies to ALL of the five subjects. In other words, there will probably always be more male than female geniuses (3-4 standard deviations above the mean) and more male than female idiots (3-4 standard deviations below the mean).

Markets In Everything: Bribes for Ph.D. Degrees

BERLIN (AP) – German prosecutors are investigating about 100 professors across the country on suspicion they took bribes to help students get their doctoral degrees, authorities said Saturday.According to two publications, students paid between €4,000 to €20,000 ($5,700 to $28,500) to a company, which promised to help them get their doctorate degrees through its extensive contacts within university faculties.

The Neue Westfaelische newspaper reported that "hundreds" of students were involved, and that the company paid professors between €2,000 to €5,000 when their clients had successfully received their Ph.D.s. It was not clear whether the students knew that bribes were being paid.

Big Gender Gaps for 12th Graders on NAEP Exams

Results from the 2005-2006 National Assessment of Educational Progress (NAEP) tests:For 12th graders taking the Economics subject exam in 2006 (data available here), the mean score for male students was 152 and the mean score for female students was 148, and that gap of 4 points was statistically significant at the 1% level (p = .0071). Likewise, in 2005 there was a statistically significant gender gap in favor of males by 4 points on the Science exam (149 average for males vs. 145 for females), and a statisticallysignificant two point gap for the Math exam (151 average for males vs. 149 females). In contrast, there was a statistically significant gender gap in favor of females by 13 points on the reading exam (292 mean for females vs. 279 for males), and a statistically significant difference of 18 points in favor of females on the writing exam (162 mean vs. 144).

Stocks for Home Builders Rally to 10-Month High

The iShares Dow Jones US Home Construction ETF seeks investment results that tracks Dow Jones U.S. Select Home Construction index. Among the main holdings are Centex, KB Home, Pulte, Toll Brothers and other home builders. The Home Construction ETF went over 13 yesterday for the first time since October 14, 2008 and reached a fresh 10-month high. Home construction stocks are showing positive signs of recovery, with returns since the first of the year (more than 30%) more than three times the overall market return (less than 10%).

LA Shipping Volume Shows Some Improvement

Updated: Seasonally Adjusted

Although still below levels from a year ago, shipping volume at the Port of Los Angeles has shown some recent improvements, with increases in four of the last five months (see chart above), and a 39% rebound in July's volume compared to the February low.

Updated: Top chart above shows seasonally adjusted data, with increases in three of the last five months.

Manufacturing Output Per Worker Hits Record High

As I reported several days ago that manufacturing employment had fallen below 12 million jobs for the first time since 1941, and that manufacturing jobs as a percent of total employment fell below 9% (see chart above), the lowest percentage ever in BLS history (back to 1939).

The chart below shows manufacturing jobs and manufacturing output, using BLS data on manufacturing employment (data here) and Federal Reserve data on the dollar value of manufacturing output (data here), monthly back to 1972. The general trend over the last 40 years is clear: the U.S. has been producing more and more manufacturing output with fewer and fewer workers.

In fact, at the same time that U.S. manufacturing employment fell to a record low (as a share of the workforce), the productivity of manufacturing workers reached an all-time record high in July of $223,915 (in constant 2000 dollars) worth of output per worker (see chart below). That's almost 3 times as much output per worker as in the early 1970s, and twice as much output per worker compared to the mid-1980s.

Bottom Line: More and more manufacturing output with fewer and fewer workers should be considered a positive trend for the U.S. economy, not a negative development. We should think of it the same way as the trend in farming over the last 150 years - we're much better off as a country, with a much higher standard of living, with 3% of Americans working on farms compared to 150 years ago when about 65% of Americans toiled on farms. If we can continue to produce more manufacturing output with fewer workers, we'll be better off as a country, not worse off.

Friday, August 21, 2009

MSCI World Stock Index Reaches New 10 Mo. High

The MSCIBarra World Stock Market Index reached a fresh 10-month high today of 1,080.57 points, closing at the highest level since October 6, 2008 (see chart above). From its early March low, the World Stock Market Index has increased 57%. Leading the world stock market rally are the emerging markets, which are up by 78% since early March.

Despite Rising Gas Prices, The Onset of Economic Recovery Is Driving Higher Traffic Volume in June

The graph above shows traffic volume for all roads in the U.S. (data here) on a moving 12-month basis from January 2005 to June 2009, along with gas prices at various times between December 2007 and June 2009 (data here). For 16 consecutive months between December 2007 and March 2009 the 12-month moving traffic volume fell (shaded area in graph), consistent with the 17 consecutive months starting in November 2007 of percentage decreases in monthly miles driven compared to the same month in the previous year, see CD post here. It's interesting that gas prices during this period of falling traffic volume ranged from as high as $4.06 in July 2008 to as low as $1.68 in December 2008 and traffic volume continued to fall. Traffic volume increased slightly in April of this year for the first time since November 2007, and increased again in June by 2 billion miles, the highest monthly gain since October 2006. Hypothesis: The demand for gas and driving are highly inelastic with respect to gas prices, but are highly sensitive to general economic conditions. Falling gas prices from $4.06 per gallon last summer to $1.68 by last Christmas wasn't enough to stimulate driving, but the onset of an economic recovery in June was enough of a stimulus to finally increase traffic volume, despite rising gas prices in each month this year.

ECRI: The Great Recession Is History

NEW YORK, Aug 21 (Reuters) - A gauge of future economic growth made steady gains in the latest week, sending its yearly growth rate to a fresh 26-year high and suggesting a strong recovery is already in motion, a research group said on Friday. The index's annualized growth rate ticked up to 17.5 percent after hitting a 26-year high of 14.3 percent last week, which was also revised higher from 13.4 percent.

It was the highest yearly growth rate the index has seen since the week to July 29, 1983, when it was 17.8 percent.

"It is high time to break from the herd of pessimistic analysts, who will continue to bemoan economic weakness long after the Great Recession is history," said Lakshman Achuthan, Managing Director at ECRI.

Bank Index Hits 8-Mo. High, Up 153% from March

The KBW Bank Sector (BKX) Index is a capitalization-weighted index composed of 24 geographically diverse stocks representing national money center banks and leading regional institutions including Bank of America, Citigroup, Comerica, JP Morgan Chase, Wells Fargo, etc.The KBW Index closed today at an 8-month high of 47.12, the highest close since early December 2008. From the bottom in early March, the KBW Index is up by a whopping 153% (see chart above). Yet another sign that the U.S. financial sector is healing, and another sign of general economic recovery taking place in the U.S. economy and financial markets.

Canadians Visit U.S. to Get Health Care

DETROIT FREE PRESS -- Hospitals in border cities, including Detroit, are forging lucrative arrangements with Canadian health agencies to provide care not widely available across the border. Agreements between Detroit hospitals and the Ontario Ministry of Health and Long-Term Care for heart, imaging tests, bariatric and other services provide access to some services not immediately available in the province, said ministry spokesman David Jensen. The agreements show how a country with a national care system -- a proposal not part of the health care changes under discussion in Congress -- copes with demand for care with U.S. partnerships, rather than building new facilities.

MP: Where will Americans go if we ever decide to adopt Canadian-style health care?

Since the end of World War II, major health care reform proposals have generally always cost more—sometimes significantly more—than the highest cost estimates published while the legislation was pending.

The chart above from John Goodman's Health Policy Blog illustrates the eight examples outlined in the JEC report (Table 1: By a Country Mile: Historical Examples of Erroneous Health Care Cost Estimates), including the Medicare DSH program (actual costs were 17X higher than first estimated), the entire Medicare program (actual costs are 9.17 higher than originally projected), etc.

Traffic Volume Increases in June For Third Straight Month, First Time in Almost Three Years

The Federal Highway Administration reported today that travel on all roads and streets increased by +2.0% (0.2 billion vehicle miles) in June compared to June 2008, the largest monthly increase since October of 2006 (see graph above). This was the third consecutive monthly percentage increase in traffic volume compared to the same month in the previous year, following 17 consecutive monthly percentage decreases (see graph above) starting back in November 2007.

Further, the monthly increases in traffic volume in April, May and June mark the first time in almost three years that traffic volume has increased three months in a row. The increase in June traffic volume probably reflects the combination of lower gas prices and a pickup in economic activity.

Rep. Fleming: Congress Should Lead By Example, Enroll Themselves in Post-Office Style Medicine

Representative John Fleming (R-LA): As a physician, I am amazed at the number of bureaucrats in this House who are quick to claim a government-run health care plan is the reform this country needs. In response to this, I have offered House Resolution 615 that will offer members of Congress an opportunity to put their money where their mouth is, and urge their colleagues who vote for legislation creating a government-run health care plan to lead by example and enroll themselves in the same public plan.

Music Goes Digital: Downloads = 35% of Music Sold

Online music sales have grown to more than a third of all music sold in the US, with iTunes making up a full quarter. CD sales remain dominant, but given the trajectory of online sales, that may not last for long. Music sold through the iTunes Store makes up a full quarter of all music sold in the US, according to a new report from the NPD Group. The market research firm noted that paid digital music downloads have continued to grow since 2007 (from 20 percent to 35 percent this year) with the help of iTunes, Amazon, and Walmart's online offerings, and that digital music sales may even equal CD sales by the end of 2010.

Markets In Everything: Glow in Dark Toilet Paper

U.S. Coin Metal Value Calculator

Intrinsic metal value = 1.82 cents

The website CoinInflation.com calculates the intrinsic metal value of coins, based on current closing prices for zinc, copper, nickel, and manganese prices at the New York Mercantile Exchange (NYMEX). Examples:

The current market value of $100 worth of old pennies (1909-1982 Lincoln pennies, with 95% copper and 5% zinc) is $182.16.

$100 worth of the newer pennies (1982-2009 Lincoln zinc pennies with 97.5% zinc and 2.5% copper) would be worth $46.57.

$100 worth of the current quarters (1965 - 2009 Washington quarters with 91.67% copper and 8.33% nickel) is worth $16.22.

Obama's House of Three Dozen Czars

Watch Pajamas TV video "Obama's House of Czars" with InstaCzar Glenn Reynolds (Instapundit blog). Once three more czars are appointed to currently unfilled positions, it will bring the total number of czars and czarinas to about 36.